China’s reluctance shows that its push to finance infrastructure across Asia hardly amounts to a blank check. It also keeps Beijing’s leaders away from a project in a disputed area that has triggered three wars between Pakistan and India, where tensions over shared waters are rising. “China is doing a smart thing by putting money up for smaller projects with better returns,” said Priyanka Singh, an associate fellow at the New Delhi-based Institute for Defence Studies and Analyses, who has published papers on the Diamer Bhasha project. “China has made its calculations and concluded that it doesn’t directly serve its interests.” On a visit to Islamabad this week, Chinese President Xi Jinping picked a $1.65 billion, 720-megawatt hydropower plant in Karot, Pakistan, as the first project for his $40 billion Silk Road fund to build infrastructure in Asia. He made no mention of t...